The Bank of Japan (BOJ) is likely to leave policy unchanged when it meets next week, despite a surge in long-term interest rates and a brighter economic outlook that has fuelled a stock market rally.
Speculation has mounted that the BOJ would be pressed to boost its purchases of Japanese government bonds (JGBs) to steady the market after Finance Minister Mr Masajuro Shiokawa said he wanted to meet with BOJ Governor Mr Toshihiko Fukui this week.
But after meeting yesterday, they merely agreed to closely monitor market developments, agreeing that the recent rise in long-term interest rates was not a concern at present.
Mr Fukui on Monday played down the need for the central bank to stem the rise in JGB yields, even though at one point last week the benchmark 10-year cash bond yield had roughly trebled to 1.4 per cent from historic lows seen less than a month ago.
Mr Shiokawa said after their meeting that his ministry had not made any requests to the central bank ahead of the BOJ's two-day policy-setting meeting that kicks off on Monday. A policy decision will be announced on Tuesday.
The BOJ buys 1.2 trillion yen of long-term government bonds as part of its operations to achieve its money market liquidity target of 27 trillion to 30 trillion yen.